Strategies

Tax-favored retirement investment vehicles, such as individual retirement accounts
(IRAs) and 401(k) plans, offer an attractive way to accumulate funds long term for
your future. Are you taking full advantage of what they have to offer?

These tips may help you make the most of your retirement accounts:

Contribute the maximum

IRAs and 401(k) plans let you defer taxes on investment earnings until you receive
them, presumably in retirement. The tax advantages of these accounts may offer you
greater accumulation potential than similar taxable investments. As an added bonus,
your contributions may generate current tax benefits: Pretax 401(k) contributions
reduce your current tax liability dollar for dollar, and your Traditional IRA contributions
may be tax-deductible.

For 2014, the IRA annual contribution limit is $5,500. The 401(k) contribution limit
is the lesser of the maximum percentage contribution limit allowed under each of
your employers' plans, or $17,500. For example, if your employer's 401k plan allows
you to contribute up to a maximum of 10% of your salary, and you earn $50,000, your
maximum contribution limit is $5,000, not the $17,500.

Consider catch-up provisions

For those IRA account holders who are age 50 or older, don’t forget about your “catch-up”
provisions. Current legislation lets you add an extra $1,000 to annual contributions,
or $6,500 per year total. While 401(k) plans allow an additional $5,500 over the
annual limit.

Consider a "rollover"

You may be eligible to receive a lump-sum distribution from a qualified retirement
plan if you retire, change jobs or the firm terminates its plan. If so, consider
electing a direct rollover of the funds to an IRA (or to your new employer’s qualified
retirement plan). A direct rollover lets your retirement savings continue to grow
tax-deferred until withdrawal. Even if you are retiring, you may not need the entire
balance at once. With a rollover, you can spread out the distributions – and the
tax liability – through your retirement years.

Invest according to your objectives

Most 401(k) plans offer a variety of investment choices to suit a range of objectives,
and you may invest IRA assets in virtually any investment. What’s more, you may
adjust your investment allocations in tax-deferred accounts without current tax
implications.

Taxes are deferred until withdrawal. Early withdrawals before age 59½ are subject to income tax and a 10% penalty.

The products and services described in this website are for U.S. residents only. The products and services offered within this site are available through our financial advisors. Waddell & Reed financial advisors may only conduct business with residents of the states for which they are properly registered. Some products and services mentioned may not be available in all states or to all clients. Brokerage, investment and financial advisory services are made available through Waddell & Reed, Inc.

Certain Waddell & Reed offices are located in banks, credit unions and other financial institutions. Investment products offered by Waddell & Reed, Inc. on the premises of financial institutions are not insured by the FDIC, are not deposits or other obligations of the financial institution and are not guaranteed by the financial institution, and are subject to investment risks, including possible loss of the principal invested.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus, or if available, a summary prospectus, containing this and other information for the mutual funds offered by Waddell & Reed, call your financial advisor or click here. Please read the prospectus or summary prospectus carefully before investing.

Do you want 'Individual Investors' to be the first page you see when you visit Waddell.com?
This will NOT affect your browser's home page and can be reset at any time.